The next important thing that the Iraqi government has to accomplish which is vital to the people of Iraq and that is to protect their assets abroad. If they do not accomplish this in a timely fashion then Iraq will go back to the ways of the previous regime when they sold oil for cash and way below market value just like saddam did in the oil for food program.
Everything would come to a standstill because the Iraqi government funds that are on deposit in the Development Fund Iraq (DFI) would be seized if no agreement is put in place.
If you remember in December 2007 the U.N. Security Council passed resolution 1790 until December 31, 2008 for when U.S. Forces will remain in Iraq. The effective date of the newly passed SOFA agreement is January 1, 2009.
In regards to the DFI funds which in February 2005 the Iraqi government deposited $5billion dollars into an account at the Federal Reserve Bank New York and earning interest. There is also another DFI account with the Central Bank of Iraq – Baghdad that is used to pay for rations, fuel subsidies, social security, government salaries and other government expenditures.
When U.N. resolution 1790 was issued President Bush signed an executive order protecting the Iraq DFI funds in and outside the United States which allowed Iraq to continue selling oil at the market value and have the funds continues to deposit into the DFI accounts in New York and the Central Bank of Iraq DFI account.
President Bush executive order expires May 2009. If no new agreement is signed the Iraq funds would be seized by Iraq’s creditors’ and individuals that have brought on lawsuits against Iraq. If Iraq does not get the new U.N. resolution which would be a limited one like one to two years to protect the funds then anyone who has filed a claim against the government of Iraq would automatically seize the funds in the DFI account in New York.
This would cause Iraq to stop oil sales as the money goes to the New York account first then to the account in Baghdad. If the DFI account in New York has been seized by a court action then Iraq would be forced to sell oil for cash only because it could not deposit money into account that has been seized. It would go back to the ways of the oil for food program of the nineties. Severely crippling Iraq, as they have been trying to get their infrastructure into the 21st century and now can’t pay for any projects because there funds have been seized.
This is very serious and hope that Iraq can get the new agreements and soon before the deadline.
Important dates to remember in 2009:
January 31, 2009 Provincial Elections
June 30, 2009 Referendum on the agreement with the United States.
Article 26 of the SOFA Agreement:
Article 26
Iraqi Assets
1. To enable Iraq to continue to develop its national economy through the rehabilitation of its economic infrastructure, as well as providing necessary essential services to the Iraqi people, and to continue to safeguard Iraq’s revenues from oil and gas and other Iraqi resources and its financial and economic assets located abroad, including the Development Fund for Iraq, the United States shall ensure maximum efforts to:
a. Support Iraq to obtain forgiveness of international debt resulting from the policies of the former regime.
b. Support Iraq to achieve a comprehensive and final resolution of outstanding reparation claims inherited from the previous regime, including compensation requirements imposed by the UN Security Council on Iraq.
2. Recognizing and understanding Iraq’s concern with claims based on actions perpetrated by the former regime, the President of the United States has exercised his authority to protect from United States judicial process the Development Fund for Iraq and certain other property in which Iraq has an interest. The United States shall remain fully and actively engaged with the Government of Iraq with respect to continuation of such protections and with respect to such claims.
3. Consistent with a letter from the President of the United States to be sent to the Prime Minister of Iraq, the United States remains committed to assist Iraq in connection with its request that the UN Security Council extend the protections and other arrangements established in Resolution 1483 (2003) and Resolution 1546 (2003) for petroleum, petroleum products, and natural gas originating in Iraq, proceeds and obligations from sale thereof, and the Development Fund for Iraq.